The single most important factor to understand is where the security sits in a company’s capital structure. You also need to know if there is a disincentive for a provider to redeem securities on the first call date. For example, the step-up for the Tabcorp note is only 0.25 per cent if it doesn’t redeem the securities at the first possible date. It might think this is a nice low cost of funding.

NICK LOXTON

partner

Prescott Securities Adelaide

There are opportunities in this sector, particularly if you buy securities on the secondary market, but it’s not a free-for-all. My view is you have money you put at risk and money you don’t put at risk. The ground between can sometimes be a little murky. It is getting harder to understand the securities because of the nature of the exit mechanisms.